Retirement Savings Shortfalls for Today’s Workers

16 Pages Posted: 23 Oct 2010

See all articles by Jack VanDerhei

Jack VanDerhei

Morningstar Center for Retirement and Policy Studies

Date Written: October 2010

Abstract

Earlier this year, EBRI updated its Retirement Security Projection Model and determined that the overall retirement income adequacy for households currently ages 36-62 had substantially improved since 2003. EBRI has received several requests since the publication of the updated RSPM results to focus on what the average present values of retirement income deficits would be for various cohorts of future retirees, and what the aggregate value of those deficits are likely to be in current dollars. This paper attempts to answer both questions and also provide a first approximation of the importance of nursing home costs and home health care expenses in the deficit numbers, as well as the value of current Social Security retirement benefits.

Using its unique Retirement Security Projection Model,® EBRI can estimate the total national aggregate and individual retirement deficits at age 65 for Early Boomers (born between 1948-1954, now ages 56-62), Late Boomers (born between 1955-1964, now ages 46-55), and Generation Xers (born between 1965-1974, now ages 36-45). This paper reports these 2010 Retirement Savings Shortfalls (RSS). The aggregate RSS for these age cohorts expressed in 2010 dollars is $4.55 trillion, for an overall average of $47,732 per individual. The average RSS varies by age cohort as well as gender and marital status. The RSS per individual is always lowest for households, somewhat higher for single males, and more than twice as large for single females. The estimated retirement shortfall for any gender/marital status combination increases for younger cohorts, largely due to the impact of health care-related costs rising faster than the general inflation rate. Adding nursing home and home health care expense increases the average individual RSS for married households by $25,317. Single males experience an average increase of $32,433, while single females have an increase of $46,425.

The PDF for the above title, published in the October 2010 issue of EBRI Notes, also contains the fulltext of another October 2010 EBRI Notes article abstracted on SSRN: “The Impact of the COBRA Premium Subsidy on Coverage.

Keywords: Aged, Defined contribution plans, Employment-based benefits, Health care costs, Home health care, Nursing home costs, Pension plan coverage, Pension plan participation, Retirement income, Retirement planning, Savings

JEL Classification: D31, D91, J33

Suggested Citation

VanDerhei, Jack, Retirement Savings Shortfalls for Today’s Workers (October 2010). EBRI Notes, Vol. 31, No. 10, October 2010, Available at SSRN: https://ssrn.com/abstract=1696173

Jack VanDerhei (Contact Author)

Morningstar Center for Retirement and Policy Studies ( email )

22 W Washington Street
Chicago, IL 60602
United States

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